VTRS, Viatris

Will it survive?

• Can it pay its interest? -5.7×
  Does not cover its interest
  Operating income ($2.7B) ÷ interest expense $471M
  What this means

  A full year of operating profit didn't cover the interest bill. This is the zombie zone: the business depends on refinancing, asset sales, or forbearance to service its debt.

• How heavy is the debt, net of cash? $13.1B
  Net debt against an operating loss
  Cash $1.3B + ST investments $39M − debt $14.4B
  What this means

  Netting $1.4B of cash and short-term investments against $14.4B of debt leaves $13.1B owed, with no operating profit this year to measure it against — understand that combination before anything else about the company. Net debt is the leverage figure that matters: the cash is already set against the debt. Strategic or illiquid investments aren't counted here.

• How long is cash tied up? 166d
  Long (60+ days)
  DSO 78 + DIO 157 − DPO 69 days
  What this means

  Days cash is tied up between paying suppliers and collecting from customers. Lower is better; a long cycle means growth itself eats cash.

Is it a good business?

• Return on invested capital -0%
  Below average through the cycle
  6-yr median, range -8%–3%; -8% latest = NOPAT ($2.1B) ÷ invested capital $27.8B
  Industry peers: median 17%
  What this means

  The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; a return below the cost of capital (~8%) erodes value as a business grows rather than building it — the test Buffett weighs most. The headline is the median of the last 6 years (it ran -8% most recently), so one peak or trough year doesn't set the verdict. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.

• Owner-earnings margin 14%
  Solid through the cycle
  8-yr median margin, range 8%–19%; latest $1.9B = operating cash $2.3B − maintenance capex $379M
  Industry peers: median 13%
  What this means

  What an owner could take out without starving the business: operating cash less the maintenance capital it must spend to hold its position — Buffett's owner earnings. That's 14% of revenue this year, a 14% median across 8 years. Treating stock comp as the real expense it is (less $178M of SBC) leaves $1.8B.

• Are earnings backed by cash? $2.3B
  Loss, but cash-generative
  Net income ($3.5B) · cash from operations $2.3B
  What this means

  The company reported a net loss, so a conversion ratio isn't meaningful. What matters then is whether operations still threw off cash, here, they did.

How is the cash used?

• Where do the earnings go? 26%
  Reinvests most of it
  Dividends + buybacks $501M ÷ Owner Earnings $1.9B
  What this means

  Of $1.9B Owner Earnings, $501M (26%) went back to shareholders, $0 dividends, $501M buybacks. Net of $178M stock comp, the real buyback was about $323M. Returning most of it is the mark of a mature business with little left to reinvest at a high return; reinvesting most could mean a long runway, or empire-building. The split doesn't say which; the return earned on it (see ROIC) does.

• Investing or harvesting? 0.14×
  Harvesting
  Capex $379M ÷ depreciation $2.8B
  What this means

  Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.

Graham’s defensive tests · 1 of 5 met

Graham’s numerical criteria for the defensive investor (The Intelligent Investor, ch. 14), run on the filings. A floor of safety, not a buy signal; many fine modern businesses fail his strictest liquidity rules by design.

• Adequate size Pass
  Revenue ≥ $2B · $14.3B
  What this means

  Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.

• Strong liquidity Miss
  Current ratio ≥ 2× · 1.38×
  What this means

  Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.

• Conservative debt Miss
  Debt ≤ working capital · $14.4B vs $2.7B WC
  What this means

  Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.

• Earnings stability Miss
  A profit every year (8-yr record) · 4 loss years
  What this means

  Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.

• Dividend record Miss
  Uninterrupted dividends · none paid
  What this means

  An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.

• Earnings growth —
  Earnings +33% over the record · —
  What this means

  Earnings were negative early in the record, a growth rate isn't meaningful.

• Moderate price —
  P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price
  What this means

  Graham's valuation gate, the wall he kept between a sound business and a sound investment. Three-year average earnings are $-1.17/share (latest year $-3.02), the averaged base the calculator's gate runs on, and book value is $12.63/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.

Durability & moat, 2018–2025

Whether the record’s returns held, and what the capital reinvested earned.

• Profitable years 4 of 8
  What this means

  Lost money in 4 year(s), look at what happened there before trusting the average.

• Return on capital ≥ 15% 0 of 7 yrs
  What this means

  A moat shows up as a high return on invested capital that holds year after year, not one good vintage.

• Operating margin 4% → −5% (3-yr avg ends)

  In the filing’s words The words explain the slip: the filing names price competition rather than pricing actions of its own — a business that looks to take its price, not set it.

  What this means

  Through the cycle the operating margin slipped — about 4% early to −5% lately, median 0% — competition or costs are biting in.

• Reinvestment, incremental ROIC returns capital
  What this means

  The capital base barely grew: this business returns cash through dividends and buybacks rather than reinvesting. Judge it on the cash returned, not on compounding.

• Owner earnings growth +1%/yr
  What this means

  Owner earnings grew about 1% a year over the record.

• Worst year 2025 · −18.7% op. margin
  What this means

  Operations went underwater in 2025, understand why before trusting the good years.